Temporary workers can choose between agency PAYE, joining an umbrella company, or being a director and shareholder of their own limited company, often referred to as a personal service company or PSC.
Here's a brief overview of each option available to you as a contractor.
umbrella employee
How does an umbrella company work? You have a continuous employment contract with us and assignment schedules for each assignment you undertake. As your employer we provide you with all your employment benefits.
But not all umbrellas are the same. We've been independently voted Best Umbrella Company by readers of Contractor UK four times.
limited company
With this option, you set up a limited company and become the director and shareholder. You are able to claim expenses and gain tax efficiencies. Subject to IR35 legislation, you may draw dividends as remuneration rather than a salary. Best advice suggests that this option might be suitable for highly paid workers contracting for the long term.
There are a number of issues which need to be carefully considered before deciding on the limited company option; statutory responsibility as a director, the administrative burden of operating the company, IR35 (whether you can withdraw money via a dividend), and the financial risk of anti-avoidance legislation (managed service company).